VALUATION HIGHLIGHTS
- Products constitute 72% of the Trefis price estimate for Cisco's stock.
- Network Services constitute 28% of the Trefis price estimate for Cisco's stock.
WHAT HAS CHANGED?
- Latest Earnings - Q4'25
Cisco’s Q4 FY 2025 earnings came in stronger than expected, with revenue up 8% year over year to $14.7 billion, driven largely by 12% growth in networking and 9% growth in security, while services remained flat. GAAP EPS rose 31% to $0.71, and non-GAAP EPS grew 14% to $0.99, reflecting expanding margins—65.7% GAAP gross margin and 68.4% non-GAAP. Operating margins also held strong at 23.5% GAAP and 34.3% non-GAAP. Product orders increased 7% y-o-y, fueled by surging demand for AI infrastructure, with AI orders surpassing $800 million in the quarter and $2 billion for the year—more than double Cisco’s initial target.
Note: Cisco's FY'25 ended on July 26, 2025.
- Outlook
Looking ahead, Cisco guided Q1 FY 2026 revenue to $14.65–$14.85 billion and EPS of $0.97–$0.99, while projecting FY 2026 revenue of $59–$60 billion and EPS of $4.00–$4.06. The Q4 highlighted Cisco’s solid execution in AI and core networking, but with services growth stagnant, future performance will depend heavily on sustaining AI momentum and competing effectively in a crowded infrastructure market.
BUSINESS SUMMARY
Cisco designs and sells networking and communications technology and services. It creates networking equipment such as switches and routers used primarily by businesses and Internet service providers to route data such as emails, videos, files, and other digital communication. For example, an email that you send to a distant friend travels through various switches and routers made by companies like Cisco, Juniper, Huawei, and Alcatel-Lucent along the path to its destination.
SOURCES OF VALUE
Infrastructure Platforms
Over the past few years, Cisco has had a roughly 60% market share in the Switches market (although the figure has declined in recent years). Similarly, Cisco's share in the router market has also been comfortably over 50% in recent years. Cisco's share in the enterprise WLAN market is also around 50%. The company's dominance in these market spaces is expected to continue in the coming years, with competitors commanding a significantly lower share in these markets.
Network Services
In addition to networking hardware, Cisco provides maintenance and support services to its customers to help them fix problems that occur with networking equipment. Cisco's network service revenues and profits are dependent on the installed base of Cisco switch and router equipment.
